TUESDAY 10 NOVEMBER 1998

MAJOR GENERAL A SHARMAN, MR B SALZMANN, MR D EVANS, MR N PREST AND MR D GARLAND

  31. Good morning. Mr Prest, could you introduce your colleagues please?
  (Mr Prest) Good morning. I am the Chairman of a company called Alvis which is in the business of manufacturing military vehicles. Major General Alan Sharman on my left is the Director General of the Defence Manufacturers' Association. Brinley Salzmann is from the DMA and the closest we have to a technical expert on the subject on which you want to make enquiries of us. On my right is Mr David Evans who is the Managing Director of a company called Chemring Group. Mr Douglas Garland is the Managing Director of a company called RBR. Both of these gentlemen have extensive experience and experiences of the export licensing system.

  32. Thank you very much. It is interesting that we have already had people this morning giving us evidence about concerns which in effect would slow the process down. The burden of some of your evidence would suggest that you feel the time limits for the handling of ELAs are too long. You pointed to the American and the French experience. What is the response to the views which you have been advancing about the possibility of accelerating the time taken so the applications could be dealt with more quickly? Have you any concerns that in some respects the quality of the scrutiny might diminish as a consequence of the speed with which they would be handled? Is that a source of concern for you?
  (Mr Prest) May I say at the outset that as a team we welcome the opportunity to give evidence to your Committee? We welcome the White Paper. Industry as a whole is entirely cognizant of the fact that the business of the export of defence equipment needs to be controlled. It is a proper subject for Government and nobody in industry I have ever met has quarrelled with that fundamental precept. We welcome the White Paper as an opportunity to draw out some of these issues and to clarify certain features of the way the export licensing system is operated for the future. Our concerns rest primarily on the process itself, although we have some other points to make. In that respect our concerns about the process are fundamentally that the rules need to be clear, that the licence process itself needs to be transparent and efficient, including with respect to time limits, and that it should be at the lowest possible cost to all concerned, industry and Government. On the specific question of time limits, I am not aware, perhaps my colleagues will chip in if they think otherwise, of any detailed response we have had from Government on the suggestions which have been made for a time limited process under which a licence would be deemed to be issued by default. It is dismissed relatively summarily in the White Paper without any extensive argument as to the pros and cons of it. Our concern is that the current system essentially lends itself to risk of abuse by Government, taking longer to consider some of the issues than is necessary. We do not think that the risk of decisions not getting proper scrutiny would be increased by the process of having a time limit because of two points. One is that it would probably serve to drive a streamlining of the process in other ways, in other words, the way that licences are applied for, the categories of equipment and countries which are capable of being covered by open general licences or by a more routine sort of system. To have a timetable would perhaps actually oblige the authorities to streamline some of the rest of the decisionmaking which is relatively routine so as to enable them to concentrate on more difficult cases. At the moment the system, we would argue, does not discriminate as well as it should between the very high percentage of business which should be uncontentious in policy terms and the small percentage of business which does raise concerns. Our general view on that would be that no, we do not see the quality of decision making should be adversely affected by it. There could obviously be some exception to the rule whereby the Government is capable of extending the time process in certain cases. There would inevitably have to be a get-out of that sort.

  33. Form 680 has something like a 90 per cent chance of being accepted. In April, Mr Evans, you gave evidence to the joint inquiry and said that your company, Chemring, had come through that hurdle only to find you were knocked out by another means. Could you expand on the nature of the application and the difficulties you had? I am interested in this as an example of the system apparently not quite working or alternatively working rather well because you were thwarted in doing something which perhaps needed closer scrutiny.
  (Mr Evans) Chemring is a PLC with a turnover of about £80 million; not a big company but we export over 70 per cent of our business. Sixty per cent of our business is defence, the other part of our business is in marine safety. We are international market leaders in marine safety under the name of Pains-Wessex. We are market leaders in military pyrotechnics. We supply UKMOD with at least 90 per cent of their pyrotechnic requirements in competition. We are also market leaders in expendable countermeasures for the protection of platforms from missile attack and radar seeking. Over the last 12 months we have applied for 140 export licences. If you go on to the DTI web site, question 13 asks how long it will take to get an export licence. It says that you should allow a minimum of four weeks for the application to be processed. The export control organisation aims to issue licences within ten working days, where we do not need the advice of other government departments or 20 days where we do. Our experience is that four per cent are within 20 days, 80 per cent greater than 30 days, 40 per cent greater than 50 days and 14 per cent greater than 100 days. The longest is one for 377 days, which is the export licence to which you referred. One of the problems we have is a total lack of understanding for the type of products which we supply. We do not get multi-million pound contracts: we get tens of thousands, a hundred thousand, maybe a couple of million pounds. We are not high profile: aircraft, ships, missiles, radar systems. The device in question had the word "grenade" attached to it so the alarm bells go up. It was a device which was used for startling terrorists in anti-drug situations by making a bang and a flash. The payload itself is constrained from moving away from the body by a cord so it cannot move any further away than one metre. It goes bang, flash and it does disorientate you. We explained all of that to DESO you go to the marketing desk at DESO first. You say that you have a customer and before you spend any more marketing time visiting and developing the customer these are the type of products you want to go for. It costs a lot of money to cross the Atlantic, stay in hotels.

  34. To whom were you selling this?
  (Mr Evans) This was to Colombia. We got a form 680 and we went through the process. Once we got the 680 form we accepted the inquiry from the customer, we gave them a price in competition and then we applied for the export licence. I can show you enormous correspondence right up to Tony Lloyd, also copies to the head of DESO. The export licence is still in the Foreign Office awaiting a decision. I have lost the business to a competitor but then a lesson has been learned. In our particular case, there does not seem to be enough awareness for the type of products which we supply. I fully support open export control; I really fully support it but once it goes into the system ... In fact I do not believe that the problem is with the Department of Trade, once it goes into the Foreign Office it seems to go into this black hole where you cannot talk to people and you do not get any feedback. We have no end date on when we can get a response and we have little initiative to try to understand the type of product we are trying to export. At the other end you have a customer who is asking you whether you are going to supply, when you are going to supply. It is quite infuriating and there is no independent appeal process where you can get to the nub of what the problem is.

  35. Could you provide us with the correspondence you have had?
  (Mr Evans) Yes; most certainly.

  36. It would be helpful, not necessarily pursuing your individual case, there are other ways of doing that, but just as an example of the clogging up of the works certainly this seems to be quite a useful example.
  (Mr Evans) I understand. I did not want to pick up this particular example, it was just a general lack of feedback and lack of knowledge of when an export licence is going to come out which frankly does not allow us to carry out our business in a commercial professional way.

  37. Is it just a judgement you have made—and let us use this as an example because perhaps it is a pretty good example given the length of delay involved? Have you just reached a subjective view that you think it is held up in the Foreign Office as opposed to the DTI? Do you have any evidence to back that up?
  (Mr Evans) It is a judgement based on the amount of lobbying, questions of a variety of individuals and personalities and I have come to the conclusion that is where the problem is.

  38. In the DTI there are people who specialise in certain technical aspects. It might be something a bit bizarre and unusual but as I understand it there would normally be a fairly rapid communication, either verbally, or exchange of correspondence, if necessary perhaps under rare circumstances an actual visit out to meet with your company's technical experts who have designed this particular piece of kit to get a better understanding. Was that all undertaken in this case?
  (Mr Evans) The DTI have gone out of their way to understand the product. The DTI have been very supportive.

  39. Obviously alarm bells sound everywhere, do they not? Three hundred and seventy-seven days is absolutely not acceptable. You say this was just a grenade and that may be what sounds the alarm bells. Could it have been put to dual use in any way or could there be any other view than what you have told us today that could possibly hold it up in the Foreign Office? Or is it that you believe there is not the expertise in the Foreign Office to understand what you are exporting?
  (Mr Evans) I cannot answer that question on whether there is expertise in the Foreign Office or not.